Tax Benefits: What You Should Know

No one likes to hear about taxes. The word makes most people grimace, and conjures images and thoughts of dreadful math, record keeping and never ending paperwork. However, if you are talking about tax benefits, you will probably get a more positive reaction and, perhaps, even a smile.

You should definitely be aware that one of the greatest parts of owning a home is the equity you gain, the tax breaks you receive, and some specific deductions from your income tax that you would not get if you were only a renting tenant.

When taking homeowners’ deductions, you will need to be familiar with the form and where to put what. You will have to file a 1040 form and itemize your deductions in the A schedule. You can only take itemized deductions or standard deductions, so you will probably want to choose which will benefit you more. A tax advisor can help you decide if you are not sure or do not have enough information.

If you are a homeowner, you can deduct any interest that you have paid for a home loan. This includes home improvement investments, home equity loans, and first or second mortgages. You can only deduct for two residences for which you have held mortgages. You cannot deduct for business properties or properties you rent.

If your mortgage was over $1 million, you may not be able to deduct the interest. Your mortgage cannot exceed $500,000 if you are married but filing on your own. If you have home equity, you can deduct for interest that does not exceed $100,000, or $50,000 if married and filing separately. Your loan-to-value ratio cannot be more than 100 percent, meaning you cannot be receiving more money than the residence costs. Also, ask a Chase lender for a year-end interest statement, also known as a 1098 form.

If you own real estate of any kind, you will receive a deduction on property taxes. Each year, an appraiser will come and declare the value of the property. The more valuable or costly your property is determined, the more tax returns you will get. Keep in mind values change from year to year, depending on the market. You will pay between one and three percent of the market value in annual property taxes.

You can also receive discount points, which are paid prematurely in order to have a lower interest rate and more deductions come the end of the year. To do this your home cannot have a mortgage more than $1,000,000. If you are using points to deduct from a refinancing loan, the deductions will be taken throughout the course of the loan.

Closing costs and homeowners’ insurance cannot be deducted from your taxes. Cost of utilities, real estate commission and home inspection or appraisal fees will also not be deducted.

Also, if you are concerned about how much you will pay in taxes for selling your home, you will be relieved to know that there are many opportunities to dismiss these taxes. Talk to a Chase employee or contact a local tax advisor for more information.